Building the board

TNNMar 2, 2007, 12.31am IST

According to the survey, a small minority (6%) of directors currently at the top 200 of the S&P 500 companies are from outside the US. Companies now want to change this, with a board that reflects the increasingly global nature of business. The survey also notes that corporate boards have begun to think strategically about the backgrounds and expertise they need in their board rooms in order to keep pace with the changing demands of the marketplace. Companies are thinking in terms of "what is the mix of capabilities we need to bring to the board over the next one to three years that will best support our business success ," the survey states.

Thomas J Neff, chairman, Spencer Stuart US, and one of world's leading headhunters, says, "The crunch in high quality independent and diverse director talent also requires companies to look outside their borders. The experience of companies with Indian board members is positive as they get a different view of the world and access to a very high quality pool of Indian executives and entrepreneurs on their Board."

Industry watchers add that it's just not mere tokenism - global companies are feeling an inherent need for diversity. "There is a push for diversity at board level, in terms of reach, culture and gender," says Kidwai. And that's where Indians fit in perfectly. In fact, Indians rank fifth at 6% of the total international directors on global boards, after the UK (28 %), Canada (21%), and Germany (10%).

Indian management skills are also well known, and many Indian leaders have proved their worth in the global arena. And it's one area where they have an edge over their Chinese counterparts. "You see more Indians than Chinese on global boards because it's a cultural difference people see. In general, Indians are more open, adaptable, and straightforward while the Chinese culture is hierarchial and quieter," says Reilly.

One reason why global companies are more comfortable is that a few NRIs, mainly academics and senior executives, have blended in well with global boards, and have added value in their assignments . Among the academicians are Kellogg dean Dipak Jain (Hartmax Corp, John Deere, Northern Trust Corp, Peoples Energy), Michigan University's CK Prahalad (NCR Corp and World Resources Institute), Tuck School's Vijay Govindarajan (Mainstay Partners and Executive Development Associates) and Emory University's Jagdish Sheth (Cryocell International and Adayana Inc). Indian executives in MNCs are hopping aboard this bandwagon too. The latest is Rajat Gupta, who joined the Goldman Sachs board in November. Earlier, Vyomesh Joshi, the high-profile head of the printers business in Hewlett-Packard joined the Yahoo board.

Indian CEOs admit it's a great experience. "Unilever is the second largest FMCG company in the world, it's Anglo-Dutch , and it operates in 100 countries. There are lot of lessons for us because we operate in 38 countries, we are also a multinational . So there will always be lessons in human resources management, innovation, corporate governance, finance and so on. In every area there are opportunities for me to learn," says Murthy. HSBC's Kidwai agrees: "The similarities between Nestle and HSBC are mind boggling. Some of the challenges are similar, so there's a huge amount of learning that I have been able to apply to HSBC. The experience of seeing vision from the top is tremendous."

Observing strategy and governance in new cultural context can be informing and interesting for Indian CEOs. Even board functioning varies across countries. Says HDFC's Parekh, "Meetings are much longer in Singapore and can go on for 4-5 hours, and they are much more structured. Topics like succession planning are very big on global boards." There is another trend emerging, of having Indians on advisory boards to the corporate boards of directors. For example, Narayana Murthy is a member of the Asia-Pacific advisory board of British Telecommunications plc. Similarly, Ratan Tata is member, Asia-Pacific Advisory Committee to the board of directors of the New York Stock Exchange, and the international advisory boards of the Mitsubishi Corporation, the American International Group and JP Morgan Chase. "In this arrangement , the company gets a window into the market, and the leaders don't have to deal with Sarbanes-Oxley issues, time constraints don't apply, and yet the work they do is strategic," says Anjali Bansal, country manager, Spencer Stuart.

Experts say it's going to be a big trend going forward , and with a limited pool of CEOs with relevant exposure and stature, there could be talent crunch here as well. "The pool of Indian directors will be taken up soon," says Jeffrey M Hauswirth of Spencer Stuart. Right now, Indian CEOs are happy representing their country abroad. "It always feels nice because at the end of the day unless India gets respect, Indians won't get respect," says Murthy.